The Advantages of Fixed Price Contracts

There’s no better feeling than finally deciding to build your family a new home.

But, before you get carried away with the planning and design aspects, there is one thing that you need to get set in concrete—and no, we don’t mean your home’s physical  foundations—we're talking getting your finances in order.

For the majority of people, a home is one of the biggest purchases they will ever make in their lifetime. And while you may have already done your budget calculations and it’s firm around what you can afford, the last thing you want is for something to throw a big spanner in your works.

When it comes to budgeting for a first home, you might start off with the best of intentions, but the reality is that there are often a host of factors, most out of your control, that can end up causing your building budget to blow out significantly. They could be crucial costs that may have been underquoted in the beginning to unforeseen problems that just happen to pop-up during construction that start causing additional bills to begin piling up. The last thing you want is to be feeling a financial crunch before you even get to open the front door to the fruits of your hard-earned labour.

One tactic that people sometimes use when building a new home is to allocate a contingency fund (usually 10-15% of their budget) to have in reserve as a financial buffer for such situations. However, an even simpler way to get on the front foot is to purchase your home on a fixed price contract.

Let’s take a closer look at fixed cost contracting and why you should strongly consider a fixed price contract for your home building.

What is a Fixed Price Contract?

A fixed price contract is a legal agreement where the total cost of building a home is set from the start. This means the builder commits to finishing the project for a fixed price that covers all materials, labour, and other agreed costs—even if prices change or unexpected issues arise during construction. Fixed price contracting ultimately means the builder takes on the financial risks while giving homeowners 100% certainty on the final costs. This is just one of the really important things to think about when you’re considering buying your first home. 

The Benefits of a Fixed Price

As more people choose to build their dream homes, fixed price contracting offers:

Cost Certainty
With a fixed price contract, you and your builder agree on the total cost before any building starts. This means you have nothing to worry about, like surprise price hikes for materials or labour.

Simplified Budgeting
Having a clear cost upfront makes budgeting easier. You can confidently set aside money for other parts of your project, like furniture or landscaping.

Less Risk For You
Under a fixed price, your builder is the one that takes on the financial risks of things like changing material costs, delays, or unexpected issues.

Transparent Agreements
Generally, fixed cost contracting clearly states what’s included in the project, leaving little room for confusion.

Focus On Quality
Since the price is set, your builder is motivated to use their resources and time wisely without cutting corners.

Because they offer clarity, predictability, and peace of mind, it’s no wonder that fixed price contracting is becoming more popular with first-time home builders.

Should You Choose a Fixed Price Contract?

Choosing a fixed price contract for your home building project depends on your financial goals, how much risk you’re comfortable with, and the details of your project. For instance, if you like knowing exactly how much you’ll spend or you want to stick to a particular budget, a fixed price can give you that assurance. On the other hand, if your project is really unique or has parts that are hard to pin down at the start, you might want to consider a more flexible option, like a cost plus contract. Let’s look at these options in detail:

When to choose a fixed price contract…

Financial Peace of Mind
Ideal for families with a strict budget, fixed price contracts set out the entire cost of the project from the very start. No worrying about additional costs or going over budget.

Clear Scope and Costs
Fixed price contracts spell out everything that’s included in the project, reducing confusion and ensuring everyone is on the same page.

Reduced Risk
Shields buyers from all financial surprises, even if outside factors, like market changes, affect the project.

Easier Decision-Making
With costs already set, buyers can concentrate on the design and features of their home without constantly worrying about price changes. This simplifies the building process and makes for a smoother experience from beginning to end.

A Standard Design Home
Fixed price contracting is particularly effective for homes with standard designs or clearly defined project scopes. For buyers looking for a straightforward build, this type of contract ensures cost efficiency and predictable timelines without sacrificing quality.

Builder Responsibility
Since the builder must keep the project within the agreed budget, there’s a natural motivation to use resources wisely and stick to timelines. This responsibility often leads to better quality results, as builders strive to meet expectations without unnecessary renegotiations

When to Not Choose a Fixed Price Contract…

Limited Flexibility
Fixed cost contracting is quite rigid, leaving little room for changes once the work scope is set. If a buyer wants to make design changes or add custom features during the project, it can lead to extra costs or delays.

Higher Initial Pricing
Because the risk is on the builder, they’ll often add contingencies to fixed price contracts to cover possible price changes in materials or labour. This can mean a higher upfront cost compared to cost plus agreements, where the buyer pays only for what is actually spent.

Complex or Custom Designs
For highly customised homes or unique projects, it can be hard to clearly define the full scope from the start. Fixed price contracts might not handle the complexity or surprises of such builds well.

Dependence on Builder’s Cost Estimates
The success of a fixed price contract depends a lot on how well the builder can estimate costs. If the first estimate is off, the buyer might end up needing to pay a lot more.

Potential for Lower Quality Materials or Workmanship
To stick to the fixed budget, some builders might take shortcuts by using cheaper materials or rushing the work. Buyers should carefully check the builder’s reputation to make sure quality isn’t sacrificed for the sake of the agreed price.

Unsuitable in Volatile Market Conditions
In markets where material or labour costs fluctuate a lot, builders might add bigger contingencies to protect themselves, which can raise the overall price. This makes a fixed price contract for home building less cost-effective compared to more flexible options, especially for long-term projects.

Whether you opt for fixed cost contracting or not, it always pays to do your research, go through an experienced  builder, and always make sure you carefully read through your contract before you sign on that dotted line.

Build a Beautiful Home With Eden Brae

Choosing a fixed price contract for home building is one of the smartest ways to secure your dream home without worrying about unexpected costs. With Eden Brae Homes, you can build with confidence, knowing your budget is protected from start to finish. Visit one of our display homes to experience the exceptional quality and craftsmanship we’re known for, or get in touch with one of our friendly consultants to explore your options. Start your journey with Eden Brae Homes today. Our fixed price contracts are available across all our stunning designer homes, offering transparency, peace of mind, and no hidden surprises.